Revamping a long-held agricultural policy that unfairly penalizes American wheat could give Canada a bargaining chip in the NAFTA talks and settle an old grievance between farmers on either side of the border, industry leaders say.

At issue is Canada’s system for grading American wheat imports — or rather refusing to grade them. Under the Canada Grain Act, all American wheat delivered to primary grain elevators in Canada is automatically classified in the lowest possible category, as feed.

The policy doesn’t affect the vast majority of wheat trade with the U.S., which occurs mainly through bulk commercial purchases by food manufacturers, analysts say.

Nevertheless, it has been a longstanding irritant for American farmers and is one of the few agricultural issues besides dairy supply management that the U.S. wants overhauled in the North American Free Trade Agreement.

“It’s protectionist,” said Mark Martinson, a North Dakota farmer of durum wheat and president of the U.S. Durum Growers Association. “I have no problem with Canadian farmers selling their grain down here but I only think it’s fair that we’re allowed to do the same up there.”

The policy has also drawn fiery criticism from U.S. President Donald Trump, who told a crowd at a June rally in North Dakota that Canada consistently discriminates against U.S. wheat.

“I don’t know what the hell it means,” he said. “I just know it’s a bad deal.”

While the situation may seem ripe for another supply-management-style showdown, key players in Canada’s wheat industry have not only declined to fight for the grain grading system, they’ve asked the government to change it.

“I grew up 90 miles from the Montana border. American farmers are our neighbours and I see their point of view,” said Tom Steve, general manager of the Alberta Wheat Commission. “We want American farmers to have fair access to our market and we, as a wheat industry, have called for this inequity to be dealt with.”

Changing the system is expected to have little impact on the Canadian market. For one thing, Canadian farmers grow enough higher quality wheat to both supply domestic needs and to export nearly 70 per cent of their annual harvest. And the weaker Canadian dollar has always made markets north of the border less attractive to U.S. exporters.

Canada exported 17.6 million tonnes of wheat last year with 2.8 million tonnes of sent to the U.S., its largest export market. By contrast, U.S. farmers sent just 50,000 tonnes of wheat to Canada, said Brennan Turner, chief executive at FarmLead, an online grain marketplace.

“If the system changes we might see U.S. exports to Canada double to 100,000 tonnes,” he said. “That is such a minute data point in the greater scheme of things that the government really doesn’t have to worry about changing this.”

The system was almost overhauled a few years ago as part of Bill C-48. But the legislation failed to pass before former Prime Minister Stephen Harper lost the federal election in 2015.

“There are some holdovers in the system after the Canadian Wheat Board was dissolved and this is one of them,” said Cam Dahl, president of Cereals Canada.

“Our system is continuing to evolve and this is a change that does need to be part of the next evolution.”

I don't know what the hell it means. “I just know it's a bad deal.

U.S. President Donald Trump

The “agreement in principle” signed by the U.S. and Mexico calls for “non-discriminatory treatment in grading of agricultural products,” a requirement that Canada could easily agree to, said Dahl. The only potential problem could come from a separate requirement that grading “operate independently from domestic registration systems,” he said. Canada requires three years of quality data on new varietals of wheat before they are allowed to be registered and graded.

“Still, I’m pretty comfortable that we can come to an agreement that meets the needs of both sides,” Dahl said. “A trade agreement should be built around that basic principle of fair treatment for both sides of the border and this is an issue that fits.”

The Agriculture & Agri-food Canada did not respond to a request for comment.

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